In one of his recent screeds for the Daily Mail, Journalist Peter Oborne wrote that austerity had nothing to do with the Grenfell inferno. He also claims austerity never really existed in Britain in the first place because the national debt actually increased.
Both Mr Oborne’s claims are incorrect and misleading – in fact they are extremely inaccurate and unfair. This is why…
Firstly, government spending has not increased as a share of GDP and here is a chart by Trading Economics, based on UK national accounts that proves it…
In fact, government spending is a lower share of GDP than it was for most of the Thatcher years. And British interest rates are still close to the lowest levels they have been since the 17th century.
Mr Oborne wrongly claims that Britain’s debt, as a percentage of national income, is higher than it has been for more than 50 years.
If he’d consulted the history books he would find that 50 years ago Britain was at almost full employment and was experiencing faster economic growth than the nation is now. Ironically, it is the very liabilities Mr Oborne rails against that endowed and enriched Britain’s middle class after WWII and led to the economic prosperity which continued right through to the 1980s.
Mr Oborne writes: “Gross public debt actually rose as a proportion of national income between 2010 and 2016, from 76 per cent to 89 per cent.”
This should read: “the supply of safe financial assets, denominated in pounds to the private sector and the rest of the world was increased to meet demands for saving while supporting the economy, or at least preventing it from collapsing”.
This is a more nuanced point and it is where Mr Oborne’s argument falls down. The point is that deficits cannot and will not bankrupt the government, or the country. The reason is simple: the British government issues its own currency. No other country can issue pounds, that would be counterfeiting. Mr Oborne – and others – must stop thinking that a government budget is the same as a household budget.
Government spending should pay for itself almost straight away and cannot leave a debt for future generations. Any government that does leave a debt for its young must not understand how money works, and must do a pretty poor job of deciding where to spend it. (On flammable cladding on public housing, for example?)
If British households, the private sector and the rest of the world wants to save pounds, the government has to supply those pounds by not balancing its budget.
The British government has virtually no foreign currency debt, and cannot run out of its own currency, so a balanced budget would be a disaster.
If the rest of the world wants to sell more stuff than it buys from the UK, and if the private sector wants to save, the government has to spend more than it taxes or the economy will crash.
This is what George Osborne discovered in 2011 when his attempts at austerity led to a collapse in spending and a brief recession.
So Mr Oborne’s claim that former chancellor George Osborne “never did actually make the cuts he promised” is true. This is because when he started to make cuts, the economy went into a double-dip recession, so he reluctantly retreated, having possibly got a glimpse that full-bore austerity would be disastrous. He substituted his promise with an austerity-lite alternative.
In his piece, Peter Oborne argues the cuts to the police force were acceptable. But this point too also needs re-thinking because it ignores the fact that other parts of the country and capital were made temporarily unsafe and unpatrolled, as coppers and fire fighters were pulled from every available borough, because there weren’t enough employed to ensure an adequate police and fire presence across Britain.
It takes the hide of a camel to call for more cuts as hundreds of bodies – humans who could have been saved – are being pulled from the towers.
He is sceptical about the argument that austerity led to the Grenfell inferno because ten million British pounds was spent on the building before it burned down. But he fails to acknowledge that those buildings were clad solely to improve the view for the rich people living nearby. They were not clad for public safety which is exactly the reason so many other tower blocks have been evacuated in the UK.
Mr Oborne respects Sir Nicholas Macpherson who was Permanent Secretary at the Treasury from 2005-2016. But both men must answer a simple question: If there was a magic money tree to bail out the financial sectors post 2008 where has that magic money tree gone?
It is not ‘la-la-economics’ to refute the idea that we should not be treating a national budget like a household budget. There is a magic money tree and it’s planted in the organisation Sir Nicholas Macpherson presided over – namely, the Treasury. That office, combined with the Bank of England, can use British pounds to re-float the real economy. The real economy is where all the people who perished in Grenfell lived and worked.
This would mean that in future there would be far less chance of another Grenfell, which we call unashamedly: The Obelisk of Austerity. That burnt out deathly tower is akin to Mr Oborne’s and Sir Nicholas Macpherson austerity arguments: more about affectation, appearance and wrongheaded economics instead of what we should be talking about: an economics that is extremely accurate, fair and fit for human beings.
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